Slow week, but 7 for 7 closing GAINS on last week’s short credit spread income trades (for 2-week total of 20 for 20), see VIDEO below.
Note: We were 18 for 20 in our Swing and Options Trader, see VIDEO below. As mentioned over the past months, we find many compelling setups but many are not good Credit Spread Candidates because of big spreads, insufficient premium, or inadequate DTE.
This feels like Groundhog Day with our same opening comments about the markets.
Last week was full of bad economic data and mixed earnings, but the Dow, S&P 500 and Nasdaq were all up for the week as states implemented different phases of re-opening their economies.
The S&P finished May with the best two-month gain since April 2009, 17.8% (and 36% off the March low)!
Despite crushing state and municipality deficits, more unemployment filings, more bankruptcies in retail and other sectors – and now, renewed tensions between U.S. and China, Trump’s attack on social media companies, and civil unrest — the markets still held incredible strength after last Tuesday’s bullish gap.
U.S. consumer spending fell by a record 13.6% in April, the steepest decline since 1959. It is predicted that GDP won’t top its 2019 peak until 2022.
Although many markets and stocks look higher, we remain cautious because last week our market internals reached bearish extremes, particularly sentiment, where bullish sentiment overwhelms bearish.
Citigroup’s Panic/Euphoria Index entered euphoria territory on Tuesday’s gap. Société General’s sentiment indicator had its quickest shift from extreme risk-off to extreme risk-on in its history.
It will be interesting to see how the Futures open Sunday night after digesting the weekend news, particularly the unfortunate rise in nationwide violent protests and riots over death of George Floyd.
Stay tuned!
NEW TRADE IDEAS
6/1: SPY – Over $306.84, consider shorting Jun (6/5) $299/289 bull put credit spread for a limit of $.85/share (closed at $1.15/share). Breakout daily. Stop $299.46.
6/1: DAL – Over $25.61, consider shorting Jun (6/5) $24/21 bull put credit spread for a limit of $.40/share (closed at $.47/share). Pullback to r20-MA after Breakout daily. Stop – none for now, will roll if necessary because of major support below.
6/1: SMH – Over $142.14, consider shorting Jun (6/5) $135/129 bull put credit spread for a limit of $.45/share (closed at $.54/share). Breakout daily. Stop $135.58.
6/1: NFLX – Over $422.37, consider shorting Jun (6/5) $400/390 bull put credit spread for a limit of $1.00/share (closed at $1.05/share). Buy Setup and reversal on Major Support and r50-MA daily. Stop $404.88.
6/1: DKNG – Under $36.65, consider shorting Jun (6/5) $42/47 bear call credit spread for a limit of $.70/share (closed at $.95/share). Climactic Sell Setup daily. Stop $40.22.
6/1: DPZ – Over $386.51, consider shorting Jun (6/5) $365/360 bull put credit spread for a limit of $.50/share (closed at $.60/share). Caution: spready. +WRB from consolidation daily. Stop $368.98.
What Others Are Saying About Master Trader
Sometimes people ask us why we teach if we are such superior traders.
The answers are numerous, but some of the main ones are that we enjoy it, it keeps us “sharper,” and we love watching our traders and investors grow and prosper in reaching their goals!
We have thousands of favorable testimonials but here are just a few recent ones:
VIDEO ON OPEN TRADES AND ADJUSTMENTS (NOTE: Also in Member’s Area in Open/Closed Trade Sheet)
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Note: We were 18 for 20 in our Swing and Options Trader, see VIDEO below.
[s3mm type=”video” source=”cloudfront” files=”Dan – Letter Videos/advisory 200530.mp4″ /]
Options Strategies Definitions Videos Here
Please read the information on Money Management below Learn how Master Trader Technical Strategies – MTS and MTS with Options Strategies can make consistent money.
Please read the valuable information in the RESOURCES tab after you log into your Member’s Area:
Because your success is vital to you – and us. Before selling options or credit spreads, we urge you to review the valuable and detailed information that we have provided for you in your Member’s Area.
If You’re in a Rush to Start A quick simplified approach to calculating contract size is to simply base your contract size based on the number of shares permitted in your Trading Plan as if you were trading the stock or ETF. Simple Share Sizing = $ Risk / Stop Loss The amount of money that you are willing to risk – divided by – the stop loss amount. For example, $100 / .20 = 500 shares. Credit Spread example, if your Trading Plan allowed you to trade 543 shares of AAPL based on the stop loss, then simply round down to the nearest hundred and short an equivalent number of contracts of the option. Since 1 contract represents 100 shares of the underlying, this would be five (5) contracts.
Master Trader and You Building Your Financial Future Together!
Happy trading! If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com
All the best,
Greg Capra Managing Director of Master Trader
Dan Gibby Chief Options Strategist
NOTE: Master Trader will show opening and closing prices of all stock and options trades. We recommend that all traders and investors use proper share sizing for positions and money management. However, we cannot recommend what that is for your particular trading style, risk tolerance, or account balance. We urge you to calculate your own share/position size based on your individualized risk parameters, Trading Plan, and familiarity with the proposed trade strategy and risk. Advanced Management Strategies (AMS) covers in detail foundational and advanced position and money management.
NOTE: Master Trader and its representatives may have existing positions in actual or other trade recommendations before or after suggested herein. Additionally, we may manage them differently for internal purposes based on different risk parameters than noted herein. All trade ideas and content are for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, option or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds. Investment or trading information provided may not be appropriate for all investors, and is provided without respect to individual financial sophistication, financial situation, investing time horizon or risk tolerance. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. Master Trader Consulting, Inc. is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors.
